Table of Contents

A.

General

This section provides procedures for the treatment
of life insurance, burial plots, crypts, vaults, and burial trusts.

MPG Letter #78 (12/89)

B.

Term Policies

No Cash Surrender Value (CSV)

Term life insurance policies that do not have a
cash surrender value are exempt property.They pay only when the insured dies.

CSV

Some term insurance policies do have a cash
value.The combined face value of the
term insurance policy with other insurance policies owned by individual
family members in the MFBU must be less than $1,500 or the net CSV of all
policies of that individual must be included in the property reserve.

MPG
Letter # 702 (6/10)

ACWDL

08-02

C.

Whole Life Policies

Whole life policies have a CSV and, depending on the age of the
policy, may pay money while the insured is alive.Whole life policies owned by members of the
MFBU that insure any individual in the family are exempt as long as the
combined face value of all of the policies owned by each family member
is $1,500 or less.If the combined
face value is more than $1,500, the net CSV of all of the policies is
included in the property reserve.

EXAMPLE

Mr. Smith owns 3 policies with face values of $300, $500, and
$600.Mrs. Smith owns 2 policies with
face values of $900 and $700.Since
the combined face value for Mr. Smith is $1,400, which is less than $1,500,
the CSV of those three policies are exempt.The combined face value of Mrs. Smith's policies is $1,600, which is
more than $1,500, so the CSV of those two policies would be included in the
property reserve.

MPG Letter #78 (12/89)

D.

Endowment Life Insurance Contracts

Endowment
Life Insurance Contracts (ELIC) are contracts in which the ‘insured’ contracts
the issuing company to hold a set amount of money for a designated period of
time to be paid to the ‘insured’ if they are still alive at the end of the
designated time period. If the ‘insured’
dies before the time period expires, the issuing company must pay the named
beneficiary(ies) a designated amount of money.

Life
insurance, under Medi-Cal regulations is a contract for which premiums are
paid during the lifetime of the insured and on which the insuring company
pays the face amount of the policy to the beneficiary upon the death of the
insured.The ELIC does not conform to
the definition of life insurance under Medi-Cal regulations because the contract
provides for a payment to the ‘insured’ if they do not die prior to the end
of the designated time period.

The ELIC
is structured more like a trust or similar legal device and since payments
can be made from the trust to or for the benefit of the individual or spouse
at any time, it must be considered available property and included in the
property reserve (see Article
9, Section 14 for more information on trusts).

MPG
Letter # 702 (06/10)

ACWDL

08-02

E.

Availability of Cash Surrender Value (CSV)

The CSV of life insurance
policy is considered unavailable once an applicant or person acting on behalf
of an applicant has taken steps to make the CSV available.The CSV remains unavailable until it is
actually received by the applicant/beneficiary as long as he/she continues to
make a good faith effort to liquidate the asset.

Once the applicant/beneficiary
receives the money (usually in the following month), it becomes
available.However, to the extent the
applicant/beneficiary is property eligible for at least one day prior to
receipt of the CSV in that month, there would be continuing eligibility
without the CSV of the life insurance affecting eligibility in that month.In addition, if the applicant applies for
retroactive coverage, the CSV will be unavailable in the retroactive month
only if he/she took the steps necessary to make it available in the
retroactive months.This may result in
the CSV being available one month and unavailable the following month.

MPG
Letter #78 (12/89)

F.

Case Situations Availability

Example 1

A person comes in to apply for
current and ongoing Medi-Cal.He
states that he has a $10,000 face value whole life insurance policy.Upon examination of the CSV tables in the
policy, the worker finds that the policy appears to have a $3,000 CSV.In addition, the person's other nonexempt
property is over the property limit.The worker informs the person of the property limit and the need to
spend down.The worker also informs
the applicant that he/she must take steps to make the CSV available for it to
be considered unavailable.The CSV
will remain unavailable until it is actually received as long as he/she
continues to make a good faith effort to liquidate the asset.

The applicant returns to the
worker the following month with a statement from his/her insurance agent that
he/she completed the necessary paperwork to obtain the CSV.The date of the statement is in the month
of application evidencing that the applicant actually took the steps to make
the CSV available in the month of application thereby rendering the CSV
unavailable for that month.Providing
the applicant had spent down the remaining excess property before the end of
the month of application, Medi-Cal could be approved for the month of
application.

When the beneficiary receives
the CSV, the worker will evaluate property eligibility once again.If applicable, the beneficiary must be
informed of the property limits once more.Regular procedures for discontinuance due to excess property would
then be followed as appropriate.

Example 2

A person comes in to apply for
retroactive Medi-Cal for the prior two months to cover a period of
hospitalization.The person's wife had
completed the necessary paperwork to obtain the CSV of their life insurance
policies soon after her husband was hospitalized.She has a receipt for certified mail from
the post office to show the date the paperwork was mailed.This establishes that she took the
necessary steps to make the CSV available in the first month for which
retroactive coverage is being requested.

The CSV was received by the
applicant in the second month in the retroactive period.The wife immediately applied it toward the
hospital bill.

If otherwise eligible, this
couple would be eligible for both retroactive months.In the first month the CSV could be
considered unavailable and in the second month the excess property was
appropriately brought below the property limit before the end of the month
(adequate consideration was received).

Example 3

A person comes in to apply in
June for himself (one person MFBU).He/She wants retroactive Medi-Cal coverage for the months of March,
April and May.The applicant's only
property is a life insurance policy with a face value of $5,000 and a CSV of
$4,000.The worker must explain the
property limits, spend down procedures and the fact that the CSV will be
considered unavailable from the date the applicant takes steps to liquidate
the asset to the date funds are actually received, as long as the applicant
continues to make a good faith effort to obtain the CSV.However, since the applicant had not
initiated these activities in the retroactive months, the CSV is available in
those retroactive months.

The applicant returns one week
later (still in the month of application) with a statement from the insurance
agent stating that all the necessary paperwork had been completed.Therefore, from that date until the date
the CSV is received, the CSV is unavailable.

The applicant is ineligible for
retroactive coverage due to excess resources, but if otherwise eligible,
Medi-Cal could be granted for the month of application and ongoing until the
CSV is obtained.At that time, the CSV
becomes available.

MPG Letter #62 (6/89)

G.Verification

The CSV of non-exempt life
insurance policies must be verified by viewing either of the following:

·The value tables included in the policy; or

·Signed correspondence from the insurance
company which indicates the current value.

MPG
Letter #170 (04/92)

09.11.02 - Burial Plots, Vaults and Crypts

A.

Exempt

The following property
related to burial plots is exempt:

·Any burial plot, vault, or crypt retained for
use by any member of the family."Member of the Family" is defined to include the applicant
or beneficiary, his/her spouse, adult or minor children (including adopted
and stepchildren), siblings, parents, adoptive parents, and the spouses of
those individuals.Neither dependency
nor living in the same household will be a factor in determining whether a
person is a "Member of the Family."

·Funds held in a revocable burial trust or
prepaid burial contract which are specifically identified for use in the
purchase of a burial plot, vault or crypt.

·Goods or services that are required in
order to purchase the plot are exempt.Additionally, goods permanently installed in the plot (e.g., a
headstone which is carved, except for the date of death, and installed on the
grave site).

·Interest on burial space contracts which is
allowed to accumulate and is not withdrawn.

·If burial space items are purchased by
installment payments, the funds applied towards the value of the burial space
items.

MPG Letter #94 (2/90)

B.

Not Exempt

The following property related to
burial plots is not exempt:

·Any burial plot retained for use by a non-family member is considered
other real property and is subject to the requirements of MPG
Article 9, Section 5.

·Any burial
vault or crypt retained for use by a non-family member is considered personal
property and is included in the property reserve.

MPG Letter #94 (2/90)

C.

Verification

The net market value of a
non-exempt burial plot, vault or crypt will be the amount listed on form
16-2DSS or MC 210 with no additional verification required unless the
value exceeds $1,800.If the value
exceeds $1,800 the following is required:

·The applicant/beneficiary will submit a
statement of value from the organization from which the plot, vault, or crypt
was purchased; and

·Subtract any encumbrances from this
value.The remainder is the net market
value.

·Cash-on-hand can be designated as a burial
fund as long as it is not commingled with other non-burial related funds.Designated burial funds may not be
commingled with non-burial property.(The funds must be separate in order to be exempt.

EXAMPLE:A bank account containing $1,200, $500 of
which is designated for burial and $700 of which is other funds the
individual uses for living expenses, is not allowable and the $500 may NOT be
exempted as a burial fund.If the $700
is moved to a separate account, the exemption may be applied to the $500
account.

·Interest which accrues on the funds which is
not removed from the fund is exempt.

·Any time the exempt burial fund is used for
another purpose, the fund is no longer considered exempt.

EXAMPLE:$2,500
is paid for a revocable burial trust.In the terms of the trust it states that $600 is for the purchase of a
casket.The worker would compute the
exemption as follows:

Amount paid into trust

= $2,500

Funds identified for casket
purchase

-$600 (exempt)

$1,500 exemption

- $1,500 (exempt)

Non-exempt amount equals

$400 included in property
reserve

·Designating burial funds may be accomplished
by signing an affidavit under penalty of perjury.

MPG
Letter #198 (01/93)

ACWDL
92-58

B.

Irrevocable Trusts and Contracts

Funds held in an irrevocable
burial trust or prepaid burial contract which are specifically identified for
use in the purchase of a burial plot, vault or crypt are exempt.Burial trusts or prepaid burial contracts
can only be rendered irrevocable when a person has applied or is receiving
some form of public assistance.

After exempting funds
identified for the purchase of a burial plot, vault or crypt (as detailed in
4, A. above), all the following burial funds for an individual shall be
exempt:

·Money or securities placed in an irrevocable
trust for funeral, cremation, or interment expenses with any of the following
trustees:a banking institution or trust
company empowered by the State of California to act as trustee in the
handling of trust funds, cemetery authority which has established an
endowment care fund, or not less than three persons one of whom may be in the
employ of a funeral director.

·Money or securities placed in an irrevocable
trust created by a deposit in an insured savings institution made by one
person of his or her own money in his or her own name as trustee for a
funeral director to provide payment for funeral services rendered by the
funeral director upon the depositor's death.

·Life or burial insurance purchased
specifically for funeral, cremation, or interment expenses, which is placed
in an irrevocable trust or which has no loan or cash surrender value
available to the recipient.

·Securities issued by a licensed cemetery
authority which by their terms are convertible only into payment for funeral,
cremation or interment expenses.

Interest earned on or
appreciation in value of the burial funds listed above shall be exempt if it
is left to accumulate and become part of the separately identifiable burial
fund.

MPG
Letter #78 (12/89)

ACWD

93-71

C.

Burial Insurance

The cash surrender value of burial insurance
policies on any individual must be counted in the property reserve.